Is Retiring In China The Solution?
Two years ago during our ICT, an ex-colleague in the SAF told me that he planned to migrate to China by the time he retired. He said that with his CPF money, he is able to convert it into lots of Chinese’s Yuan and retired comfortably (in a village). I find his mindset “ostrich” and I educate him. This is because the correct approach should be that he work hard (and smart) and improve his current income-earning situation. Hiding in China for the purpose of comfortable retirement due to favourable exchange rate is definitely not the secret to success.
Successful retirement plan takes more than that. I told him then that by the time we reached retirement age, China’s economy may have reached a state that the exchange rate is on par with the Sing$. And the living standard then in China could be so high that there may be no difference at all. What are you going to do then for the fact that you cannot “undo” or rewind” everything?
Recently, Business Times reported that China’s inflation up to 7.1% in Jan 2008. Food prices, which make up a third of the consumer basket, rose 18.2% cent in January from a year earlier. Non-food prices rose 1.5 per cent. However, authority attributed the acceleration in inflation to the timing of the Lunar New Year holidays this year and to fierce winter weather. Rising food price is a big topic here in Singapore; it is a bigger problem now in China especially in big cities.
Lifelong Income Scheme
Therefore, we should solve the fundamental problem instead of trying to get around it. Besides being personally responsible for one’s retirement plan, here in Singapore we are really fortunate to have capable government taking steps to help Singaporeans to be prepared for retirement. It is important for me to clarify here that I am not in politics, nor am I a glass-root leader or having any connection with any political party. But let’s be real and objective.
On 12 Feb 08, Manpower Minister Ng Eng Hen announced a Lifelong Income scheme that promises a regular income for as long as a member live. I will not go through the detail here. The feelings among our countrymen were mixed. While some cursed and swear, people like me praise the authority. I just had a chat with a friend and we talked about this issue. She said that some of her friends were unhappy about it as more CPF money were shifted away thus they will be getting lesser. I advised her not to be influenced by people who do not see the bigger picture. What’s the bigger picture? Well, if I am the government, managing a country, I could choose not to do anything to help the people to plan their retirement needs. I still get paid (large income) monthly.
Is it better with the new scheme then? Let’s do the following test.
Assumptions:
1) Retirement Account at 55 = $80,000
2) Life expectancy = age of 90
3) CPF RA rate = 4%
4) Any balances in Retirement account goes into estate.
According to my calculation, with the current scheme, you can withdraw $631 per month from 65 – 90, and that’s it. But with the new scheme, you will collect $652 per month (under refund option) as long as you still breath.
Two years ago during our ICT, an ex-colleague in the SAF told me that he planned to migrate to China by the time he retired. He said that with his CPF money, he is able to convert it into lots of Chinese’s Yuan and retired comfortably (in a village). I find his mindset “ostrich” and I educate him. This is because the correct approach should be that he work hard (and smart) and improve his current income-earning situation. Hiding in China for the purpose of comfortable retirement due to favourable exchange rate is definitely not the secret to success.
Successful retirement plan takes more than that. I told him then that by the time we reached retirement age, China’s economy may have reached a state that the exchange rate is on par with the Sing$. And the living standard then in China could be so high that there may be no difference at all. What are you going to do then for the fact that you cannot “undo” or rewind” everything?
Recently, Business Times reported that China’s inflation up to 7.1% in Jan 2008. Food prices, which make up a third of the consumer basket, rose 18.2% cent in January from a year earlier. Non-food prices rose 1.5 per cent. However, authority attributed the acceleration in inflation to the timing of the Lunar New Year holidays this year and to fierce winter weather. Rising food price is a big topic here in Singapore; it is a bigger problem now in China especially in big cities.
Lifelong Income Scheme
Therefore, we should solve the fundamental problem instead of trying to get around it. Besides being personally responsible for one’s retirement plan, here in Singapore we are really fortunate to have capable government taking steps to help Singaporeans to be prepared for retirement. It is important for me to clarify here that I am not in politics, nor am I a glass-root leader or having any connection with any political party. But let’s be real and objective.
On 12 Feb 08, Manpower Minister Ng Eng Hen announced a Lifelong Income scheme that promises a regular income for as long as a member live. I will not go through the detail here. The feelings among our countrymen were mixed. While some cursed and swear, people like me praise the authority. I just had a chat with a friend and we talked about this issue. She said that some of her friends were unhappy about it as more CPF money were shifted away thus they will be getting lesser. I advised her not to be influenced by people who do not see the bigger picture. What’s the bigger picture? Well, if I am the government, managing a country, I could choose not to do anything to help the people to plan their retirement needs. I still get paid (large income) monthly.
Is it better with the new scheme then? Let’s do the following test.
Assumptions:
1) Retirement Account at 55 = $80,000
2) Life expectancy = age of 90
3) CPF RA rate = 4%
4) Any balances in Retirement account goes into estate.
According to my calculation, with the current scheme, you can withdraw $631 per month from 65 – 90, and that’s it. But with the new scheme, you will collect $652 per month (under refund option) as long as you still breath.
Therefore, IMHO, Singaporeans are better off with the new scheme. According to the National Longevity Insurance Committee, “CPF members are likely to receive higher income from their Minimum Sum account without more top-ups, thanks to the extra one percentage point interest on the first $60,000 which CPF is offering and the benefit of pooling”.
So if you target to have $2,000 per month for your retirement plan, about 35% of it has been settled and secured with Lifelong Income Scheme. The remaining will depends on your unclaimed living policy, endowment plan, cash balances, stocks and funds and lastly, your house.
Having said that, there are still some other details that I don’t really understand. I need to meet up with one of my friends who are very analytical. After we analyse the new scheme vigorously, I will update my blog again.
So if you target to have $2,000 per month for your retirement plan, about 35% of it has been settled and secured with Lifelong Income Scheme. The remaining will depends on your unclaimed living policy, endowment plan, cash balances, stocks and funds and lastly, your house.
Having said that, there are still some other details that I don’t really understand. I need to meet up with one of my friends who are very analytical. After we analyse the new scheme vigorously, I will update my blog again.
